Weyerhaeuser CEO Devin Stockfish on the Housing Boom, Inflation and Monetizing Forests in the Battle Against Climate Change

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When the British Navy was the most powerful military force in the world, towering, straight trees suitable for the masts of warships were a prized strategic resource, the rare earth resources of their day. England’s old-growth forests had long been decimated, making the virgin forests of North America a highly valuable asset for the Crown, which barred locals from cutting down trees more than 24 inches in diameter, causing the Pine Tree Riot of 1772, a precursor to the Boston Tea Party.

Nearly 250 years later, the U.S. is still home to some of the most valuable timber stands in the world and timber remains a vital strategic resource. It’s also increasingly becoming a tool to fight climate change, as the carbon-capturing ability of forests takes on greater importance.

Weyerhaeuser, which began operations in 1900, is one of the world’s largest private owners of timberlands, controlling 11 million acres in the U.S. and millions more under long-term lease in Canada. Lumber is one of the most in-demand commodities in the country this summer, as the strongest housing market in more than a decade has caused the price of lumber to soar, peaking in May. Although lumber prices have fallen recently, experts expect prices to remain high relative to historic levels. The National Association of Realtors [NAR] just released a report saying that there was an “acute shortage of available housing” in the U.S. and referring to the state of America’s housing stock as “dire.” Housing “demand is just off the charts now,” says Devin Stockfish, the CEO of Weyerhaeuser. Stockfish expects the housing demand to stay strong for some time as the U.S. struggles to overcome years of failing to build enough new homes to keep up with population growth. The NAR report put the “underbuilding gap” as high as 6.8 million units.

Stockfish is also positioning the company to be a player in the emerging carbon sequestration market. Stockfish says that it’s possible that someday, for certain stands of timber, it will be more lucrative for Weyerhaeuser to use those forests for carbon capture versus cutting them down to produce lumber. (On June 21, a unit of J.P. Morgan said that it acquired Campbell Global, a firm that manages timberland on behalf of institutional investors. The Wall Street Journal said the deal gives J.P. Morgan “a position in the booming market for forest-carbon offsets, tradable assets that are created by paying landowners to not cut down trees and leave them standing to sponge carbon from the atmosphere.”)

Weyerhaeuser plants about 150 million a year, which exceeds the number that it cuts down. “We generally harvest about 2% of our land base every year. It makes sure that we can harvest at this level for hundreds and hundreds of years,” Stockfish says. He recently joined TIME for a video conversation on the red-hot housing market, why there is strong demand for Douglas fir trees in Japan and the company’s nascent carbon business. Subscribe to The Leadership Brief by clicking here.

(This interview has been condensed and edited for clarity.)

What has driven up the price of lumber this year?

It’s the best housing backdrop we’ve had in well over a decade, really going back to the Great Recession. We have massively under-built housing in the United States. Freddie Mac just came out with a study that says we are 4 million units underbuilt in the United States. We’re starting from a place of there being much less supply of housing than there is demand.

What led to the chronic underbuilding?

The whole supply chain broke down coming out of the Great Recession. Mills went out of business. The construction labor that historically built houses went on to other industries. The shortage of labor has been a big issue for the industry. And even things as simple as at the municipal level, the people that approve permits, there are just fewer of them. So almost every aspect of the supply chain that goes into building a home was severely impacted coming out of the Great Recession. We’ve been talking since 2015 about getting up to 1.5 million housing starts, but every year for whatever reason we just, we never get there.

And there was the demand spike caused by the pandemic.

There just became a whole new appreciation for the value of a home.

Are there other factors creating the demand for lumber?

Repair/remodel is actually also a very big driver, from do-it-yourself folks buying wood at Home Depot to all these people that have old houses and they want a new office, they want a new kitchen. And people that are aging in place instead of going to retirement homes—they need to do some remodeling to make their house appropriate.

Where are you seeing inflation across your supply chain and how much of a concern is that for you?

We’re seeing it. Every business is—whether it’s gas prices that have gone up—the cost of transportation has become more expensive. One of the biggest impacts to us right now is transportation. There is a massive shortage of truck drivers in this country. People are scrambling to get trucking to move products.

What about labor: are you able to hire the people you need to operate?

We haven’t had it get to the point where it’s really impacting our production, but one of the things that’s a little bit of a leading indicator that we’re watching closely is when we advertise for roles, the applicant pool has been down quite a bit versus what it has been historically. That’s something we’ll be keeping a pretty close eye on.

TIME recently published a story on people advocating using more steel and concrete to build houses in the U.S. instead of lumber.

I probably would have a very different view of that. I would argue that over time, what you’re going to see is the opposite of moving to steel, because as you think about the environmental benefits of building with wood the embodied carbon in wood is much less than steel and concrete. And that’s something I think architects and engineers and policymakers are really starting to appreciate in an environment where people are worried about global warming—and even countries like China are starting to appreciate that—there’s some benefit to building with wood versus other building materials. Having healthy large forests, which we do in the U.S, particularly in the Pacific Northwest, it’s becoming more and more of an asset. You think about pine beetle infestations in British Columbia, huge beetle infestation throughout Central Europe, forest fires in Australia, fires in Russia: a lot of the world’s big wood baskets are under stress, and so having large forested areas that are well protected, well managed, like we do in the U.S. is a big advantage. As you think out over the next 20 to 50 years, we are going to be—we are now to some extent—but we are going to be one of the world’s providers of wood products because of the health of the forest that we have here in the United States.

Japan is your biggest export market. What’s the history of that relationship?

It goes back many decades. Part of it comes from the way they build houses in Japan. They use what’s called post and beam construction, which really values high strength materials. Japanese culture really appreciates the visual appearance of Douglas Fir, but it also has one of the best strength-to-weight ratios of any tree species. So the Japanese market is where we send all of our really big straight, strong logs, and they’re willing to pay a premium.

Where does your climate solutions business stand?

When you look at having 11 million acres of timberland in the U.S. and 14 million in Canada, there are a lot of different things that you can do with that land base. Obviously we manage a lot of that to produce logs for wood products. But there is a growing opportunity to leverage some of that land for different purposes and this whole idea around a natural climate solutions business really comes out of that. Think about the demand for solar, and for wind. A company that wants to put a solar farm in place or a wind farm in place, doing business with someone like Weyerhaeuser who has a lot of land, you can deal with a single landowner. It’s away from population centers, generally. So it’s a really good way for companies that want to build these, these alternative energy programs to partner with us to leverage our land base, so we think that there’s a growth opportunity.

Do you have any solar or wind projects currently?

We have a number of wind farms on our land. We don’t build the wind farm, we basically just enter into a lease and we get royalty payments. The highest growth opportunity right now in that space is with solar. There is so much solar activity going on particularly in the southeast United States. We are having a lot of conversations with folks that want to put solar installations up.

How does solar work for you?

You go to a forest that you were going to harvest soon anyway, you harvest those trees and put up a solar farm. Typically you’re planning to leave those in place for 30 to 40 years, and then the solar company has an obligation to go take those out, and then you’ll replant the trees so you basically have a solar farm in place for one rotation.

And on the horizon?

The one that’s probably most exciting is this whole idea around carbon sequestration and carbon markets. Think about all of the companies out there that are talking about being carbon neutral. That’s a tall hill to climb: think about airlines or tech companies with big server farms, or oil and gas. They’ve got a lot of work to get there, and one of the most cost-effective ways to take carbon dioxide out of the atmosphere is through forests, and Weyerhaeuser is one of the largest private owners of forests, certainly in North America, if not the world. It’s still in the early stages, but we’re pretty optimistic that this is going to develop into a real opportunity for us.

Would that require a different approach to managing your forests?

We typically manage to create the most value. And so that means growing a big straight log in most instances because when I sell it to a lumber mill, that’s the way to maximize the profitability. That doesn’t necessarily maximize the amount of carbon that you’re growing on that acre, so you might grow a smaller tree but more trees if you wanted to maximize the carbon that you’re growing on the acre, so you could change your silvicultural approach. That incremental carbon that you create through that project is something that you could monetize with the carbon credit. We really understand how to grow trees. We have a lot of PhDs here that really understand tree growth. But the key for us, obviously, is we need to get that to a point where the price that people are willing to pay for carbon is at least equivalent to what we can get if we’re managing it for other end uses.

Do you envision a time where it is more profitable to use your forests for carbon capture than for lumber?

In certain geographies and it’ll be very land-based specific—our timberland in the Pacific Northwest is really among the most valuable timberland in the world. That’s a pretty high threshold for carbon prices. But when you’re talking about lower productivity land and some other geographies, yeah, absolutely, I could see that being a situation where you say that the trade off to manage this for carbon is better than managing it for its current timber use.

Have you read Richard Powers’s Overstory, the Pulitzer-prize winning novel on trees?

I have not. Someone just gave that to me about a month ago and I haven’t had a chance to read it yet but it’s on my list.

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